Techno-Economic Modeling

Tribal Energy Webinar Series

Tony Jimenez, Senior Engineer NREL

Jun 24, 2020 Presentation Overview

Techno-Economic Modeling (TEM) Overview (For renewable energy [RE] projects in particular)

Models and Data Resources: • Models • Resource Data • Cost Data

Example Analysis Using System Advisor Model (SAM) NREL Image Library # 08058 Library Image NREL

NREL | 2 Techno-Economic Modeling (TEM) Overview Models and Sources of Information Example Analysis

NREL | 3 Techno-Economic Modeling: What is it and Why do it?

What is it? Process to estimating the technical and economic performance of a proposed (or envisioned) energy project.

• What is the performance? TEM mostly focuses on the • What are the economics? first two items • What are the practical considerations relevant to executing the project?

Why do it? Inform decision making

NREL | 4 Techno-Economic Modeling: Simple Example (1 of 2)

Scenario: You are considering a PV project for your store, Woodlands Market, located north of Redding, CA. • Location: Lat: N 40.79, Long: W122.32 • Average Monthly Consumption: 80,000 kWh • Roof Area (flat roof): 12,000 sq. ft.

Questions • What size PV system do is needed so that annual production roughly matches annual consumption? • What size system will fit on the roof? • What is the estimated capital cost?

NREL | 5 Techno-Economic Modeling: Simple Example (2 of 2)

Consumption • 80,000 kWh/mo = 960,000 kWh/year = 2,630 kWh/day = 110 kW

Solar resource: • 4.75-5.00 kWh/m2/day (On a horizontal surface) (Source: Solar Atlas) • Assume 4.8 kWh/m2/day

PV Production (per kWdc of PV capacity) (Average) • Average daily production (ignoring tilt & losses): 4.8 kWh/day/kWdc

Capacity needed for production to (roughly) equal consumption

• 2,630 kWh/day divided by 4.8 kWh/day/kWdc  550 kWdc

Space Analysis

• Rule of thumb: 10 wattsdc (0.01 kWdc) per square foot of roof space • Rule of thumb: can use 2/3 of roof area

• Capacity that roof can accommodate: 12,000 sq. ft. x 0.01 kwdc/sq. ft. x 2/3 ~ 80 kWdc

Capital Costs

• Small non-residential (average) (up to 100 kWdc): $3,000/kWdc • Large residential: (> 100 kWdc): $2,400/kWdc • Estimated capital cost for 550 kWdc system: 550 kWdc x $2,400/kWdc  ~$1,300,000 • Estimated capital cost for 80 kWdc system: 80 kWdc x $3,000/kWdc  ~$240,000

NREL | 6 Techno-Economic Modeling: Why Use a TEM Tool?

o TEM tools do the tedious math required if you want to go beyond a back of the envelope analysis • Hourly simulation • Detailed economics • Greater precision o Many TEM tools allow for sensitivity analysis o Some TEM tools do optimization (help size components such as the battery bank and PV array) o TEM tools may have links to (or defaults for) resource data, cost data, tariff data.

NREL | 7 TE Modeling Process: Common Questions

Performance Fac. Scale Util. Scale How much energy will the system produce? x x How does the production compare to my load? x Seasonal and diurnal variations in the energy production x x System degradation over time x x Lifetime x x

Economics Will the system result in net savings? x Will the system yield a reasonable profit? x

Practical Considerations How much space will the system require? x x How much effort is required to execute the project? x x

NREL | 8 TE Modeling Process: Analysis Flow

Resource Information System Information • Size • Lifetime

Technical Performance Economic Performance • Energy production • Cash flow OUTPUTS • Energy used on site • Financial Metrics • Energy exported to grid

Site/Load Information Cost Information Business Structure • Location • Capital costs • Incentives • Consumption • O&M costs • Loans • Net metering rules • Taxes

NREL | 9 Techno-Economic Modeling (TEM) Overview Models and Sources of Information Example Analysis

NREL | 10 Models: A Sampling of What’s Out There

Model Free? Source Optimize? PVWatts Yes NREL No Photovoltaics only https://pvwatts.nrel.gov/ System Advisor Model Yes NREL No Multiple technologies https://sam.nrel.gov/ RETScreen *Partial Natural No Multiple technologies Resources www.retscreen.net Canada REopt Lite Yes NREL Yes PV, wind, battery1 Publicly available version of NREL REopt model https://reopt.nrel.gov/tool HOMER No Homer Yes Multiple technologies Energy https://www.homerenergy.com/ * Free “viewer” version available 1. More technologies to be added

NREL | 11 Resources: Resource Data

NREL offers a suite of RE resource information at https://www.nrel.gov/gis/data- tools.html . The resources are divided into three categories: • Maps, • Data Sets • Data Visualization & Geospatial Tools

Starting Points • Tribal Energy Atlas: https://maps.nrel.gov/tribal-energy-atlas • Renewable Energy Atlas: https://maps.nrel.gov/re-atlas • Wind Prospector: https://maps.nrel.gov/wind-prospector

NREL | 12 Resource Data: Tribal Energy Atlas

Screenshot of Tribal Energy Atlas

NREL | 13 Resource Data: Renewable Energy Atlas

Screenshot of Renewable Energy Atlas NREL | 14 Resources: Cost Data

Lazard’s Levelized Cost of Energy Analysis v13.0; Lazard, Nov 2019 https://www.lazard.com/perspective/lcoe2019

Lazard’s Levelized Cost of Storage Analysis v5.0; Lazard, Nov 2019 https://www.lazard.com/perspective/lcoe2019

Tracking the Sun - 2019 Edition; DOE/LBL, Oct 2019 https://emp.lbl.gov/tracking-the-sun

Utility Scale Solar - 2019 Edition; DOE/LBL, Dec 2019 https://emp.lbl.gov/utility-scale-solar

2018 Wind Technologies Market Report; DOE/LBL, Aug 2019 https://emp.lbl.gov/wind-technologies-market-report

2018 Distributed Wind Market Report; DOE/PNNL, Aug 2019 https://www.energy.gov/eere/wind/downloads/2018-distributed-wind-market-report

NREL | 15 MarketSolar (PV) Market – Cost (PV) Trends – Cost (non Trends-utility)

Notes: Percentile Range represents the band between the 20th and 80th percentile values in each year.

Source: Tracking the Sun - 2019 Edition https://emp.lbl.gov/tracking-the-sun

NREL | 16 Techno-Economic Modeling (TEM) Overview Models and Sources of Information Example Analysis

NREL | 17 Techno-Economic Modeling: More Complex Example Using SAM

Same scenario as before with a more detailed analysis using SAM.

Analyze the 80 kWdc rooftop system. NREL Image Library # 06430 Library Image NREL

NREL | 18 Analysis Facts & Assumptions (1 of 3)

Item Value Note/Source Project location North of Redding, CA Latitude 40.79° Longitude -122.32° Annual Consumption (kWh) 960,000 Average load = ~110 kW Roof area (sq. ft.) 12,000 sq. ft. Cost of grid electricity $0.10/kWh Energy charge portion of the bill ($/kWh)

NREL | 19 Analysis Facts & Assumptions (2 of 3)

Item Value Note/Source System Lifetime (years) 30 years Typical value

System Size (kWdc) 80 kWdc Inverter Loading Ratio 1.2 Within the range of typical values Racking type Fixed tilt Array orientation 180° (due south) (Flat) roof mounted Array tilt 10° (Flat) roof mounted Annual degradation 0.5%/year SAM default Array Losses 14.08% SAM default Inverter losses 4.0% SAM default

NREL | 20 Analysis Facts & Assumptions (3 of 3)

Item Value Note/Source Unit system capital cost ($/kW) $2,700/kW Tracking the Sun, Small Commercial with assumed cost reductions since 2018. Operation & Maintenance $20/kW Estimate ($/kW) Escalates with inflation Business model Tribe owns Insurance (% of capital cost) 0% Rolled into O&M Inflation 2% Used to escalate the price of utility power Tribal Discount Rate (real) 4% % Equity 25% % Debt 75% Interest rate on debt 5% Assumes some concessional financing Loan Term (years) 20 Federal Tax Rate (%) 0% Tribally owned system State Tax Rate (%) 0% Tribally owned system

NREL | 21 SAM: Models

NREL | 22 SAM: Location & Resource

In SAM, you will step through these windows to create your project

NREL | 23 SAM: System Design

NREL | 24 SAM: System Costs

NREL | 25 SAM: Lifetime

NREL | 26 SAM: Financial Parameters

NREL | 27 SAM: Incentives

NREL | 28 SAM: Electricity Rates

NREL | 29 SAM: Electric Load

NREL | 30 SAM: Results

NREL | 31 SAM: Results

NREL | 32 SAM: Results

NREL | 33 SAM: Results

NREL | 34 SAM: Results

NREL | 35 Presentation Recap

Techno-Economic Modeling (TEM) is the process of estimating the technical and economic performance of a proposed or envisioned project. It is done to inform decision making.

TEM tools are very helpful if you want to go beyond a back of the envelope analysis.

TEM is more than simply running a TEM tool. TEM results need to be leavened with sound judgement and common sense. Also GIGO (Garbage In = Garbage Out)

In TEM it is common to start with a high-level analysis and then iterate with successively more detailed analysis efforts.

Often, the most time-consuming part of the analysis is gathering the needed analysis inputs.

Sources exist that can provide needed renewable energy (RE) resource and RE technology cost information required to conduct TEM.

NREL | 36 www.nrel.gov Tony Jimenez [email protected] work: 303-275-4849

NREL is a national laboratory of the U.S. Department of Energy, Office of Energy Efficiency NRELand isRenewable a national Energy, laboratory operated of the byU.S. the Department Alliance for of Sustainable Energy, Office Energy, of Energy LLC. Efficiency and Renewable Energy, operated by the Alliance for Sustainable Energy, LLC.